Bridge Loan 101

With today’s home purchase market in full-swing, you may find yourself with more clients whose current property is on the market but they have already identified their perfect replacement home.

Many clients don’t want to risk losing the deal by making the sale of their existing property a contingency in the sales contract, so consider a Finance Factors Bridge Loan and avoid having the seller reject their offer!

What is a Bridge Loan?
A Bridge Loan is a short term loan of 12 months with interest-only payments that uses equity in a property listed for sale to purchase a replacement property.

How does a Bridge Loan work?
You are doing one loan secured on two properties: the borrower’s current property plus the new purchase property. This only works if the current property has substantial equity. When the borrower’s current property sells, the bridge loan is either paid in full or the balance is substantially reduced so that the borrower can refinance into a new smaller loan.

Here are answers to the most common questions that people ask about Bridge Loans:

Q: How do you calculate combined loan-to-value (CLTV), if you are securing two properties?See more ….